UK and International Tax news
OECD Consults On Amount B Under Pillar One
Friday 9th December 2022
The OECD has issued a public consultation document on Amount B under Pillar One, being part of the ongoing work of the OECD/G20 Inclusive Framework on base erosion and profit shifting in implementing the two-pillar solution to address the tax challenges arising from the digitalisation of the economy.
In October 2021, the IF agreed a two-pillar solution to address the tax challenges arising from the digitalisation of the economy. The IF statement described Amount B as one of the components of Pillar One and mandated Working Party No. 6 and the FTA MAP Forum to undertake the technical work to design Amount B.
In particular, Amount B needs to simplify and streamline the pricing of in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries, while ensuring outputs are consistent with the arm’s length principle for all in-scope transactions.
This is seen as important where the potential for disputes and the compliance burden for taxpayers, together with the administrative burden for tax administrations, may be disproportionate to the amounts of tax involved or the relative difficulties and complexities of the transfer pricing issues inherent in the relevant controlled transactions. There needs to be focus on the specific needs of low-capacity jurisdictions in administering the application of the arm’s length principle to such transactions.
A particular concern has been the relative unavailability of appropriate local market comparables through which arm’s length prices can be established. Amount B aims therefore to specifically address this issue by providing a basis to establish an arm’s length price in all cases using suitable comparables, wherever they are geographically drawn from.
The consultation document seeks to outline the progress made in defining what in-country baseline marketing and distribution arrangements are, how they may be identified in practice, and how in-scope arrangements may be priced in a simplified and streamlined manner, in accordance with the arm’s length principle.
Comments from stakeholders have been requested by 25 January 2023.
For more information on the above, please contact Keith Rushen on 0207 486 2378.
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